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Divided council advances developer’s TIF request

August 08, 2018

Amid objections from residents, Port aldermen vote 4-3 to draft deal for $365,000 loan, review it later this month

RESIDENTS ARE EXPECTED to move into the first phase of developer Stephen Perry Smith’s Lakepointe townhouses at the corner of Washington and Lake streets in Port Washington’s marina district in late September. Smith told the Common Council Tuesday that the remaining two phases of the project won’t move ahead without tax incremental financing to help cover the cost of soil issues on the site, which he bought from the city last year. Photo by Bill Schanen IV

By

KRISTYN HALBIG ZIEHM

Ozaukee Press staff

A divided Port Washington Common Council on Tuesday authorized city officials to draft an amended developer’s agreement that would provide a $365,000 tax incremental financing loan to developer Stephen Perry Smith to remediate soil issues on the marina district land the city sold him a year ago and he is currently developing.

But aldermen stopped short of authorizing the loan, saying they have numerous questions they hope to have answered by their Tuesday, Aug. 21, meeting, when a vote on the issue may be taken.

Kay Kasun, 513 W. Michigan St., said she is “irritated and frustrated” by the council’s actions, saying citizens asked the city to slow down and not to sell the land but officials went ahead anyway.

“We were assured it would not be (TIF funded),” she said, noting negotiations took place largely in closed meetings, not in the public eye. “We were told to trust the process, a process we no longer believe in. “I am here to lay this directly at your feet. Slow this process down. Do not just rubber stamp the process. Do the due diligence that’s required.”

Don Cosentine, 518 Brentwood Ct., asked, “Why are you helping this developer? Because you think this project is magnificent? The project is OK. If it goes bust, you’re not responsible for it.”

But Gertjan van den Broek, 506 N. Powers St., whose Harbour Lights project at the corner of Main and Franklin streets in downtown was the first to receive a TIF developer’s incentive and whose planned Blues Factory entertainment complex is also slated to receive TIF funds, said TIF money should be used to encourage development that otherwise won’t happen and that is in the public interest.

“I hope you will consider the public good,” he told the council.

The city’s Finance and License Committee recommended approving the TIF loan, City Administrator Mark Grams said, noting that the city would obtain the funds through a State Trust Fund loan.

There is no interest charged on the loan until the developer draws the money, he said, adding that if Smith were to receive the first funds after Sept. 1, the first payment wouldn’t be due until 2020 — well after the project’s first and second phases are to be completed and on the tax rolls, which is important because the loan will be repaid using taxes from these improvements.

The first phase of the project will add $1.125 million to the tax rolls this year, Smith said, while the second phase is projected to add $1.62 million in 2019.

The loan is expected to be repaid within 10 years, Grams said.

Smith told the council that without the funds, he would be forced to “push the pause button” on his Lakepointe townhouse development at the east end of Washington Street when the first of three buildings at the site is completed.

“We truly intend to finish the project. It’s not a case of if, but when,” he said.

Smith said that when he proposed the 11-unit development, he had no intention of seeking TIF funding but that the cost of building materials, labor and dealing with soils issues caused the budget to skyrocket.

“We’re having a perfect storm,” he said.

The $365,000 is a maximum, and would only go to offset the cost of the soils issues, Smith said, adding that when he bought the land he believed he was getting a clean, buildable parcel.

That was the city’s understanding as well, Grams said, noting the main concern was soil contamination and not soil conditions.

Smith said he knew when he bought the land that it had some soil issues, noting tests showed some wood fibers in the ground.

But soil borings did not reveal the extent of the problem, he said, adding almost the entire site is fill material.

“Looking at the soils report, you wouldn’t know,” Smith said. “Had we known then what we know now, we would have asked for a TIF loan.”

Smith said that without the increased cost of materials, the $250,000 contingency fund for the project perhaps could have absorbed the cost of fixing the soil issues.

Sigwart questioned when Smith knew about the soil issues, how much the city has already spent on remediating contaminated soil and how much Smith increased the price of his townhouses to cover the added costs.

He also noted that Smith bought the property “as is.”

“It seems to me compromise is going to be the solution here,” Sigwart said, suggesting that splitting the cost might be the best answer.

But Gasper said he’s worried the TIF loan won’t be adequate to solve the soils issues.

“My biggest fear is we give you $365,000 and phase two is built and the next year we’re back in here again,” debating funds for phase three, he said.

Ehrlich said the issue is larger than just the TIF loan.

“You have to look at the big picture and what TIF is there for,” he said, noting the townhouses will add residents to the downtown who will support the businesses there. “We’re trying to create a sustainable downtown. If it was just about is (the loan) going to be paid off in 10 years, it might not be worth it, but we have to look at the big picture.”

Mayor Marty Becker said he was “a little bit torn” about the issue.

“To me, ‘as is’ is ‘as is,’” he said. But the value the completed project brings to the TIF district and its long-term impact has to be weighed against that, Becker said.

“It seems to me if we give you (Smith) this, the return on our investment will be faster and more than if we don’t,” he said.